If a Country Had Capital Flight, Then the Real Exchange

question 186

Multiple Choice

If a country had capital flight, then the real exchange rate would

• A)fall. To offset this fall the government could increase the budget deficit.
• B)fall. To offset this fall the government could decrease the budget deficit.
• C)rise. To offset this rise the government could increase the budget deficit.
• D)rise. To offset this rise the government could decrease the budget deficit.

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